Although the COVID-19 pandemic has faded, employers continue to offer work from home arrangements to potential and existing employees to attract and retain talent. In some instances, employees are exclusively remote workers while others have a hybrid arrangement that consist of both telecommuting and time spent in employers’ offices. As a result of this new reality, employers are forced to examine the applicability of employment laws to remote employees that perform work in geographical locations outside of where the business is located. Complying with the various state and local employment laws can be challenging with a multi-state workforce.
Many employers are surprised to learn that they will have to comply with employment laws in those states where the remote-based employees are physically located and perform work. Consequently, it is vital that employers are cautious and diligent in identifying the applicable laws governing employment relationships with out-of-state remote employees.
State and local employment laws vary significantly from state to state. Even within New England, the states each have different leave laws, wage and hour laws, and even tax laws with varying eligibility standards. For example, an employee of a New Hampshire company who primarily works on a remote basis in Massachusetts will likely be subject to the Massachusetts earned sick leave law.
Generally, out-of-state remote employees are subject to the state and local employment laws, where they are physically located and perform work, but there are also other considerations. For example, if a business has an office in a state where employment laws (e.g. wage and discrimination laws) are more favorable to the employee, a remote-based employee may decide to file suit in that state rather than the state where the employee is physically located and performs work.
Recent legal trends suggest that employers should be mindful of the following factors when assessing which state employment law may govern the employment relationship with an out-of-state remote employee:
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- Choice of Law Provision. The courts will review the written agreements to see if the parties have selected a particular state law to apply to the employment relationship. For example, if a New Hampshire company would prefer the laws of New Hampshire to apply to its employment relationships it would be recommended to establish that expectation in writing with its employees.
- Geographic Location of Where Work is Performed. As stated above, the geographic location of where the work is performed may dictate which employment laws govern. Employers who work with hybrid or full-time remote workers should know exactly where its employees are actually working and be prepared to comply with that state’s unique set of employment laws, as well as any applicable local laws.
- Trainings/In-Person Meetings. The courts will review the ongoing contacts between the employee and the business. For example, if the remote worker is required to attend trainings and meetings in-person, the employer should consider scheduling meetings in the jurisdiction it seeks to apply to the relationship.
- Reporting Chain. The courts will also review which jurisdiction the remote worker reports into for management purposes. For example, if a New Hampshire based employee reports to a supervisor in Massachusetts, this might lend support for a finding that some or all of the employment laws of Massachusetts should govern the relationship. This particular factor has been assessed by courts in Massachusetts, when former employees have sought to have the Massachusetts Wage Act apply. Among other things, the Massachusetts Wage Act provides for treble damages in the event of a violation. Therefore, it is recommended that remote workers report to managers and supervisors located in the business’ desired state jurisdiction.
- Client/Customer Contacts. The courts will also check to see in which states the employee is having contact with clients and customers. An employee who works remote in Massachusetts, and only has contact with clients within Massachusetts, may be found to be subject to the employment laws of Massachusetts. Assigning the out-of-state remote employee to clients or customers residing in the state where the company prefers to have the employment laws govern the relationship will be helpful in establishing the correct nexus.
In short, it is important that businesses pay attention to the above-referenced factors and seek legal counsel before hiring an out-of-state remote employee or before entering into an agreement allowing a current employee to work remotely from another state. Businesses should review these matters carefully because these issues are complex and nuanced.